Correlation Between Wolverine World and Nike

Can any of the company-specific risk be diversified away by investing in both Wolverine World and Nike at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Wolverine World and Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wolverine World Wide and Nike Inc, you can compare the effects of market volatilities on Wolverine World and Nike and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Wolverine World with a short position of Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wolverine World and Nike.

Diversification Opportunities for Wolverine World and Nike

-0.08

Correlation Coefficient

Wolverine World  Nike

Good diversification

The 3 months correlation between Wolverine and Nike is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Wolverine World Wide and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Wolverine World is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Wolverine World Wide are associated (or correlated) with Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Wolverine World i.e., Wolverine World and Nike go up and down completely randomly.

Pair Corralation between Wolverine World and Nike

Considering the 90-day investment horizon Wolverine World Wide is expected to under-perform the Nike. In addition to that, Wolverine World is 1.52 times more volatile than Nike Inc. It trades about -0.22 of its total potential returns per unit of risk. Nike Inc is currently generating about -0.11 per unit of volatility. If you would invest  7,427  in Nike Inc on December 28, 2024 and sell it today you would lose (1,098) from holding Nike Inc or give up 14.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Wolverine World Wide  vs.  Nike Inc

Wolverine World Wide

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wolverine World Wide has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Nike Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Wolverine World and Nike

The main advantage of trading using opposite Wolverine World and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wolverine World position performs unexpectedly, Nike can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nike will offset losses from the drop in Nike's long position.

The idea behind Wolverine World Wide and Nike Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.